Oil prices steady as clouds gather over fuel demand, looser supply curbs

MELBOURNE: Oil prices were unchanged on Friday, with trading marked by growing uncertainty about global recovery in fuel demand as new COVID-19 cases surge in several countries just as major producers get set to loosen production curbs.

U.S. West Texas Intermediate (WTI) crude futures rose 1 cent to $40.76 a barrel at 0204 GMT, while Brent crude futures were steady at $43.37 a barrel. Both were still on track to end the week up slightly.

On Thursday, the United States reported at least 75,000 new COVID-19 cases, a new daily record. Spain and Australia reported their steepest daily jumps in more than two months, cases continued to soar in India and Brazil stepped up lockdown measures.

The two benchmark contracts fell 1% on Thursday after the Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, agreed to trim record supply cuts of 9.7 million barrels per day (bpd) imposed earlier this year by some 2 million bpd from August.

But actual output additions will be closer to 1.1 million bpd, as countries like Iraq - which overproduced compared with their commitments to cut supply in May through July - agreed to bigger reductions in August and September.

Vivek Dhar, commodities analyst at Commonwealth Bank of Australia, said the market took some heart with the agreement for some to compensate for previous non-compliance with commitments at a time when there is uncertainty over demand growth.

“They’re taking those precautions. That gives the market confidence that OPEC+ is looking quite closely at those conditions to make sure they don’t push the market in the wrong direction,” he said.

Analysts expect the market to remain in the $40-45 a barrel range, with the looming return of some U.S. supply and uncertainty over fuel demand as new lockdowns may be needed to curb the resurgence of COVID-19 cases.

“The problem with the market right now is prices have got to a level where we’re concerned U.S. supply is going to come back,” Dhar said.